JPMorgan recently released a research report stating that crypto liquidations are expected to decrease this month and the market is anticipated to recover from August onwards. The bank revised its year-to-date crypto net flow estimate to $8 billion, down from its previous estimate of $12 billion.
The bank expressed skepticism about the sustainability of the $12 billion estimate for the remainder of the year. This skepticism was based on the high valuation of bitcoin (BTC) compared to its production cost and the price of gold.
One of the key factors influencing the reduced estimate was the decline in bitcoin reserves held by exchanges over the past month. JPMorgan analysts, led by Nikolaos Panigirtzoglou, suggested that this decrease in reserves could be attributed to bitcoin liquidations by creditors of Gemini or the defunct crypto exchange Mt. Gox. Additionally, the German government’s sale of crypto assets seized from criminal activities may have contributed to this trend.
The revised estimate of $8 billion comprises various components, including a $14 billion net flow into crypto funds by July 9, Chicago Mercantile Exchange (CME) futures flows totaling $5 billion, and $5.7 billion raised by crypto venture capital funds year-to-date. The estimate is adjusted by $17 billion to accommodate the transition from wallets on exchanges to new spot bitcoin exchange-traded funds (ETFs).
Overall, JPMorgan’s report provides insights into the current state of the crypto market and offers a perspective on the potential trends in the coming months. As the market continues to evolve, it will be interesting to see how these factors play out and influence the overall dynamics of the cryptocurrency space.